Wirehouses dominate traditional advisory distribution, controlling 42% of the market, according to research by Cerulli Associates.
"Wirehouse advisors make up just 16% of overall headcount, but control more than 42% of all traditionally advised assets," states Kenton Shirk, associate director at Cerulli. "The wirehouse channel offers both the greatest opportunity and the greatest challenges for product providers. As they constitute the lion's share of advisor-directed assets, these firms are a strategic priority for nearly every asset management firm."
Having recognised their position, wirehouses have sought to maximise the revenue they receive from the product providers through revenue sharing, preferred partnership programs, and a variety of other sponsorship opportunities.
"While this has reduced the profitability of wirehouse relationships for asset managers, the pure scale of the opportunity at the wirehouse firms has kept providers from abandoning their distribution efforts," Shirk explains.
"Product providers have become even more focused on maximising their returns of investment at each wirehouse by implementing portfolio specialist roles in attempts to increase their placement on home-office-generated recommended investment lists, which heavily influence advisor investment decisions," Shirk continues.
Though Cerulli expects modest reductions in wirehouse marketshare in the near term, the channel will remain the premier distribution opportunity for product providers, and, therefore, a central element of their strategic distribution plans.